Bitcoin has fallen sharply, dropping 12% from its August peak to its lowest level since early July amid a stark warning the bitcoin price could crash much further.
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The bitcoin price plummeted towards $109,000 per bitcoin after hitting an all-time high of over $124,000 per bitcoin just this month (leading to Harvard economist Kenneth Rogoff admitting he got bitcoin wrong ten years ago) and hitting ethereum, XRP and other major cryptocurrencies to the tune of almost $200 billion.
Now, as traders say they’re seeing surprising signs the bitcoin price rally could be over, fears of a wider bitcoin price and crypto crash are growing.
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Bitcoin has tumbled sharply lower, sparking fears of a broader bitcoin price crash that’s hit ethereum, XRP and other major cryptocurrenices.
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“Most price action reflects traditional risk-asset behavior tied to monetary policy, where investors are rallying around anticipated liquidity,” Thomas Chen, the chief executive of institutional bitcoin software developer Function, said in emailed comments.
“Any deviation from the Fed script in September will cause a violent repricing. A delayed or ‘no-cut’ scenario from the Fed could trigger a large correction across major crypto assets and altcoins.”
The Federal Reserve is widely expected to cut interest rates in September, though officials continue to say they’re waiting on jobs and inflation data before making a decision.
“This isn’t a crypto problem but a leverage problem: expectations that the Fed will cut rates [raises the possibility that] liquidity will flood the market [which causes] crypto [to] go up,” Chen said.
However, Chen warned that traders shouldn’t be surprised if a “cascade of forced selling occurs” due to it being built on a “house of cards of a single narrative of a soft landing,” adding “the correction would likely separate speculative crypto positions from genuine institutional bitcoin and ethereum deployments.”
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The bitcoin price has rocketed higher over the last year, boosting ethereum, XRP and the wider crypto market, but raising fears a bitcoin price crash could be looming.
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Today, the Federal Reserve’s preferred method of measuring inflation in the U.S. economy will be released in the form of the core PCE [personal consumption expenditures] price index, with the consensus forecast for inflation to stay level at 0.3% month-on-month for July.
“Inflation data will take centre stage later today,” Russ Mould, investment director at AJ Bell, said in emailed comments.
“Fed chair Jerome Powell has already indicated that the central bank has had a slight shift in thinking, with the market now expecting an 85% chance of a 25-basis point interest rate cut at September’s meeting. Today’s inflation figure will play a crucial role, alongside jobs data, in determining whether the Fed cuts at this meeting, and if so, by how much.”